Home > Industry > Banking > PNB merger to create second largest PSU bank from 1 April. 10 things to know

NEW DELHI : In its bid to create "NextGen banks", the finance ministry has decided to merge 10 public sector banks into four. The merger of United Bank of India (UBI) and Oriental Bank of Commerce (OBC) with Punjab National Bank (PNB) will give birth to India's second largest public sector bank after the State Bank of India (SBI). The PNB merger, which will make the bank bigger than Bank of Baroda (BoB), will come into effect from April 1 next year, according to a recent PTI report.

Hit by a $2 billion fraud and money laundering case centering around fugitive diamond merchant Nirav Modi, the merged PNB's deposit market share will jump to 8% as compared to its standalone market share of 5.2% as of March 2019.

10 things to know about PNB merger:

1) PNB's total business after the merger will increase to 17.95 lakh crore. Together, the merged entity will have 11,437 branches. Amongst all public sector banks, PNB will be smaller in size only after SBI. PNB will also have the second-largest branch network.

2) From April 1, when the merger comes into force, PNB is likely to have a new name.

3) Although bank unions have called for strike to protest against the merger, banks have made it clear that there will no retrenchment of staff in the merged entity, and also ruled out the possibility of bringing in Voluntary Retirement Scheme (VRS). PNB's CEO and MD Sunil Mehta said every employee is going to gain from the merger.

4) The government has already announced a capital infusion of 16,000 crore into PNB and 1,600 crore into UBI. "The merged entity will be adequately capitalised and comply with basel requirements for the next three years," a senior UBI official said.

5) The average net NPA of the three banks is 6.67%, which is expected to fall below 6% post the amalgamation.

6) Share-swap ratio: Valuers will be appointed separately, following which a merchant banker will determine the fair value.

7) Moody' Investors Service has updated its outlook on the PNB to positive from stable. Centrum Broking had said, "Consolidation has generally been near-term detrimental to the stronger (acquiring) banks and an extended integration period remains a challenge."

8) Last month, Finance Minister Nirmala Sitharaman had announced that 10 public sector banks would be merged into four. Besides PNB, Canara Bank and Syndicate Bank will also be merged into one. Union Bank of India will amalgamate with Andhra Bank and Corporation Bank while Indian Bank will merge with Allahabad Bank.

9) The exercise, seen together with the previous two rounds of bank consolidation, will bring down the number of nationalised public sector banks to 12 from 27 in 2017.

10) Sitharaman had said it is expected that the merger will enable the banks to have a much larger capital base and will also enable them to scale up their operations and increase market penetration.

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